The answer to how much it costs to form a Texas LLC is complex and depends on a number of factors. This blog post will explore the costs of starting an LLC in Texas, including both necessary and optional expenses.
We'll also discuss what you need to do before making any financial commitments so that you can decide if this is the right business structure for your needs.
Necessary Expenses For Texas LLCs
When opening a limited liability company in Texas, you will be able to dodge some expenses, but some you will have to cover.
There is no such thing as forming an LLC for free because you have to pay the state filing fee, which is the minimum requirement to be legally recognized as a business entity and conduct business in the state.
Texas LLC Certificate of Formation
The Certificate of formation in Texas is the same document as the Articles of Organization in other states. It represents a document that records the LLC name and its principal business address and purpose.
Without it, the business is not legally recognized in the state, and the LLC formation process can't be completed.
The cost for filing this document is $300. You pay the filing fee to the Texas Secretary of State only once, so you don't have to worry about filing the Certificate of Formation annually.
A Texas Registered Agent Service
A registered agent or a registered agent service is a service that ensures your company files and pays all of the required taxes. A Texas registered agent has to be a physical person or an entity.
With registered agent services, you can sign up for a service that will provide access to digital filing and payment systems, as well as receive important legal announcements from the Secretary of State on your company's behalf.
Texas law requires all LLCs to have a registered agent.
The cost of hiring a registered agent will depend on the services you are looking for. Many registered agent service providers will offer a variety of plans to suit your needs, whether it's filing all state taxes or simply receiving legal notifications from the Secretary of State.
The basic package starts at around $40 a year, but it can be slightly higher depending on your business needs.
*Note: You can be your own registered agent without hiring a third-party agency.
The only requirement is that you are of legal age and have a physical address in the state of Texas. However, keep in mind that this can be a burden on your time and energy.
Optional Expenses for Texas LLCs
Some Texas LLC costs can be optional, depending on how you set up the business. In addition, a limited liability company that plans to provide a professional service or services will likely have to cover additional expenses, like permits and licenses.
LLC Operating Agreement
Operating agreements are legal documents that set forth the LLC's business practices and rules, including how profits are distributed among members. Operating agreements can be a valuable tool for Texas LLCs because they allow you to bypass state laws by drafting your own terms of operation.
When developing a company agreement, remember that it must include specific items according to Texas law.
It is not mandatory to have an operating agreement, but it can be very beneficial. If you do not have an operating agreement, the default provisions of Texas law will apply to your LLC.
You can draft an operating agreement by yourself if you have experience in these matters or download the draft online. If you use one of these, you can create an LLC agreement that is legal and binding.
However, if you're not sure about the provisions that you need to include, seek legal advice and let a lawyer draft your operating agreement for you. Keep in mind that it will probably cost more than using one of these templates.
Name Reservation
If you want to reserve your desired LLC name, you can file the Application for Reservation form at a $40 filing fee and reserve your Texas business name for up to a year.
Expedited processing
When filing your Certificate of Formation with the Texas Secretary of State, you can opt for expedited processing that shortens the period of time that your Certificate is being processed to only a few business days. The expedited processing fee is $25.
Licenses and permits
There are different types of permits and licenses that you'll need to legally operate your business in Texas, but the requirements and costs will vary depending on your location.
Some licenses are entirely free to obtain, while others can go up to a few thousand dollars.
Annual Report
Once you set up your LLC in Texas, there are ongoing costs that need to be covered in order to keep your LLC in good standing.
These costs are typically paid when filing your annual report with the state, which is done online through an e-service portal on the Secretary of State's website.
On top of these standard cost items, there may be additional business tax requirements, like franchise tax.
In Texas, an annual report includes two filings: a public information report and a franchise tax report.
Your LLC must submit these documents on an annual basis to file your franchise tax return and maintain your company.
There is no fee for the annual report but keep in mind that it has to be submitted through the Texas Comptroller of Public Accounts no later than May 15th. If you fall behind with the annual report, there is a $50 fine.
Amending Articles of Organization
If there is any change to your LLC, such as a different management structure or a change in your registered agent, you will need to amend your Articles of Organization.
Like most business filings in Texas, this process is a relatively simple one and can be done by filing the Amendment with the Texas Secretary of State's office along with $15 for each Amendment made.
Expenses for Foreign LLCs
If you want to expand your business to the state of Texas and form a foreign LLC, you may be wondering how much it will cost to form the LLC. The fees and expenses of filing an application for a foreign limited liability company in Texas are $750.
You can apply for this by filing the Texas Application for Registration of a Foreign Limited Liability. The fee is payable to the Texas Secretary of State.
Keep in mind that the additional cost for LLCs may still apply to foreign entities too.
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FAQs
How Much Does It Cost to Get an Ein Number in Texas?
Obtaining an Employer Identification Number is free of charge. You can apply for it via the IRS website.
Is Texas Subject to Federal Tax?
Yes, an LLC in Texas is subject to federal income tax. A single-member LLC is treated as a sole proprietorship and reports its federal taxes (income and expenses) to the IRS on Form 1040. A multi-member LLC reports its income and expenses on Form 1065.
How Much Does It Cost to Open a Business Bank Account For a Texas LLC?
Depending on the bank, your entity type, and the location where you established your Texas LLC, exact requirements to establish a business bank account may differ. Some banks demand an opening deposit that can range from just a few dollars to a few hundred dollars.
Are Texas LLC Owners Liable for the Business Debts?
A business owner of an LLC in Texas has full liability protection against his business debts and claims.
This means that if a customer or supplier wins a lawsuit against your Texas LLC, the plaintiff can only seek money from the company's assets, not from the personal bank accounts of its owners.
Can an LLC have a DBA in Texas?
Yes. You can file for a DBA if you wish to operate your small business in Texas through a name other than the company name.
However, please note that a DBA is not required to operate your business in Texas. The filing fee for a DBA depends on the county where you form an LLC.
How Much Is a Single-Member LLC in Texas?
A single-member LLC in Texas needs to cover the same expenses as any other type of LLC, and that is the $300 for the Certificate of formation. Other expenses can be lower than with other entities, especially when it comes to taxes.
How Much Does It Cost to Set Up an Llp in Texas?
The cost of setting up a limited liability partnership in Texas will depend on several factors, such as how many LLP members there are and where you're physically located in Texas. Each partner has to pay $200 per LLP partner. For example, if you and your partner each own half of an LLC, then both partners will pay this fee because it affects them equally.
How Much Is a Single-Member LLC in Texas?
A single-member LLC in Texas needs to cover the same expenses as any other type of LLC, and that is the $300 for the Certificate of formation. Other expenses can be lower than with other entities, especially when it comes to taxes.
Does an LLC Have to Be Represented by an Attorney in Texas?
The Texas law doesn't require LLC to have attorneys representing them. However, it is always a good idea to have legal representation for any company you are starting because the laws can be complex and difficult to understand without education on business law. The best thing about hiring an attorney or consulting with one before filing your LLC paperwork is that they will help minimize your risk of mistakes that could cause future problems.
Conclusion
If you are considering setting up a Texas LLC, it is important to explore your options and get advice. This will help ensure that the LLC cost doesn't break your budget or put unnecessary strain on your finances.
In many cases, business consultancy can save money by helping you avoid overpaying for certain things when there's no need.
We recommend contacting ZenBusiness who can answer any questions about whether starting an LLC makes sense for your particular situation before deciding anything else.
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